Time-disaggregated dividend-price ratio and dividend growth predictability in large equity markets

We consistently show that in large equity markets, the dividend-price ratio is significantly related with the growth of future dividends. In order to uncover this relationship, we use monthly dividends and a mixed data sampling technique which allows us to cope with within-year seasonality. Our approach avoids the use of overlapping observations, and at the same time reduces the implications of the impact of price volatility on the dividend-price ratio. An empirical analysis using market level data from U.S., U.K., Canada and Japan strongly supports the dividend growth predictability hypothesis, suggesting that time-aggregation of dividends eliminates significant information.